Contract Administration: Refurbishment of Students Accommodation Block - Literature review Example

Contract Administration Refurbishment of Student’s Accommodation Block Delay and Responsibility 1. Introduction Normally, termination the contact of a contractor can only be justified by an employer on three situations. According Murdoch and Hughes (2002), one justifiable cause is the length of delay. When the delay is too great that it is apparent that the contractor’s intention is not to be bound by the contract, the employer may seek for termination. Another reason for termination is if the contract itself stress the completion of the work on a specified date is very important. This is on legal term the phrase “time is of the essence”. The third is when the employer issued a reasonable notice to the contractor that time is of the essence and the later failed to comply (p.329). However, our task is not about the cause of termination but whether if such delay is the responsibility of the contractor. Discussions about delays and accountability will focus on the forms of contract used as determination of responsibility differs with JCT and ECC. 2. Delay and Responsibility In our scenario, the contract is underway when blue asbestos was discovered in the service ducts. As expected, a risk assessment was made and the result says that it should be remove from the ducts. Consequently, these additional works will delay the refurbishment by more or less 8 weeks depending on the estimate. As for any standard contract, delay is a significant factor in the it’s fulfilment and therefore we need to analyse if the above cause of delay is the responsibility of the contractor and what actions need to be taken in accordance with JCT and ECC contract guidelines. In addition, if the delay is indeed contractor’s responsibility, we have to realize its financial impact. Delay analysis is required if we are to carry the task of identifying the extent of contractor’s responsibility. However, the most significant and complex task is how to determine or establish the “nexus of cause and effect” (Barnes 2006:269). There is no state or implicit prerequisite that the completion date which should have been fixed or re-fixed having regard to what is fair and reasonable should be after the time of the fixing or re-fixing so as to make that date physically possible to be achieved. This is because the function of “adjusting the completion date is to delimit the contractual period of work” (Jones and Baylis 2004:87); thus, there is nothing in principle to stop the architect in an appropriate case from adjusting that date to a point of time. That goes for both before the date of the exercise of the power and before the relevant event in question (Jones and Baylis 2004:87). 2.1 Joint Contracts Tribunal (JCT) In his desire to start the job and maintain considerable progress, the contractor according to Chappell (2000) is sometimes doing “more than his fair share of responsibility” (p.51). For instance, when a contractor started the work with inadequate drawings and information, he tends to do his best when he should be actually demanding more of it to protect his interest. In JCT 98, the architect of the project is required to submit accurately dimensioned drawings with sufficient information. Unfortunately, errors are usually discovered when the works are in progress. Apparently, the contractor who may have carried out considerable amount work at that time may in the worse situation tear down what he already built and start again. Another is doing additional works that will cost him considerable delay that could put him in a position of breaching the contract. Certainly, when there is a violation of the contract, somebody must receive a compensation for damages. In our case, errors in the scope of work were detected while the work is in progress thus it is unreasonable to expect that the contractor will assume responsibility with such error (p.54). Chappell (2000) argues that the contractor has no duty to search for discrepancies and variations between the contracts documents, as it is the responsibility of the architect to provide the contractor with correct information (p.6). Apparently, the scope of work is relevant information included in the contract documents thus it must be accurate. JCT 98 in clause 2.3 and for all forms of contract for the matter provides for the correction of this type of inconsistencies and it is clear that the employer must pay for any additional cost resulting from inaccurate information. However, an architect may argue that a contractor carrying out his obligation must examine his scope carefully to detect errors but this does not change the legal position we mentioned earlier. The right thing for the contractor to do when he finds discrepancy is to ask the architect in writing for an instruction. He must not be anxious to proceed or attempts to rectify the problem on his own when drawings or bill of items does not match his actual work. The reason is he will lose his right to demand payment for variation and may be obliged to assume responsibility for the design of that particular work. He should ask the architect for instructions and inform him of delay and disruption since doing so can help him recover his loss in terms of time and money and payment for the additional work. In JCT’s clause 2.3, the architect is entitled to make an extension of time provided the contractor submitted the appropriate notice. In addition, if there are valid grounds such variations requiring additional works and others missed-out work, the architect can examine the net effect in order to provide the suitable period for extension. If he fails to allow further extension, the contractor can go for arbitration to secure an extension of time and ask for liquidated damages (Jones and Baylis 2004:87). The grounds for an extension must be reasons ‘beyond the control of the contractor’ similar to discovering blue asbestos inside the ducts. Discovering blue asbestos is undoubtedly beyond the contractor’s control or force majeure, a circumstance independent of the will of man. In addition, removing such dangerous type of asbestos inside the ducts is certainly a valid ground for additional work and therefore requires time extension. Variation according to Parris et. al. (2002) is the “alteration or modification of design, quality, or quantity of works” (p.178). He added that although the order of the work may be changed or created if there is no order stated in the bills of quantities, there is no provision that this part of the work must have specific dates. Therefore, the contractor is not obligated to complete the parts by any particular dates and under clause 13.1.2 of JCT 98, the architect has no authority to demand completion of the parts by any dates (Parris et. al. 2002:178). However, Jones (2004) explains that an obligation to do a particular work involves doing necessary ancillary work. These works were not clearly mentioned in the items of work but ‘indispensably’ necessary to complete the contract. This kind of work he added will not result to a change or variation and will have to be done within the contract’s original amount (p.178). The point we are trying to emphasize here is that works for blue asbestos removal may be interpreted as part of the specified work thus a contractor may be granted an extension but not additional payment. Moreover, employers may see it as not a ground for extension since it is a prerequisite and part of the contract amount. In this case, the contractor will be obliged to complete all tasks within the original completion date with no extension or additional compensation. One good example is the actual court case presented by Furmston (2006) between Bacal Construction Limited and Northampton Development Corporation. As part of the their tender, Bacal submitted a sub-structure design and detailed priced bill which formed part of the contract documents based on the belief that borehole data provided by NDC is correct. The tender document specified that the site was a mixture of Northampton Shire sand and upper lias clay. However, when the work was already in progress, Bacal discovered that in some areas of the site, tufa (a rough, thick, rock-like calcium carbonate) thus, re-design of the foundations is necessary. Bacal claims that there had been a breach of an implied term by NDC as their design is in accordance with NDC’s data. According to Bacal, if the work is delayed by unexpected problems, the contractor is unlikely to be able to complete his contract in time (p.160). On the contrary, clause 22 of their contract (a JCT 63 Form) requires Bacal to pay or allow liquidated damages in this kind of event. NDC on the other hand insists that Bacal failed to complete the contract. However, there are provisions in the contract that permits an extension of time if because of the architect’s instruction the completion of the work on the specified date has been delayed. The delay resulting from the discovery of tufa was unfortunately was not brought about by an architect’s instruction thus not applicable. It is only valid when an architect gives contractor instructions requiring a variation. However, the judge ruled that the corporation was indeed liable on an implied term of warranty (p.160). 2.2 Engineering Construction Contract (ECC) In ECC matters related to ambiguities and inconsistencies, required both parties to notify each other and the project manager must issue instructions to resolve the matter. As it is designed to be a flexible as possible, ECC minimise the incidence of disputes and designed to stimulate good management through early warning procedure. This procedure is the equivalent of JCT’s written request from the contractor asking the architect for instructions. Another is the management of compensation events when the project manager acting on behalf of the employer whenever possible is presented with options for dealing with the problem from which can choose. More importantly, the ECC ensures that the contractor is safe financially from the choice that the Project Manager will make (NEC3, 2005:3). The procedure intends to enable the parties to address solutions at the earliest opportunity. The idea is to encourage joint problem solving thus both parties are “obliged to notify the other of matters that could increase the total contract price, delay completion, or impair the performance of the works” (Jenkins and Stebbings 2006:94). However, failure to give an early warning of a compensation event may reduce the payment due to the contractor. In our case, the early warning notice as specified in clause 16.1 of ECC 2 is probably delay completion and increase contract price. This means written notice coming from the contractor telling the project manager that blue asbestos was discovered in the ducts, the risk involved, and the unavoidable removal this dangerous material. The contractor may specify the cost of removal and amount of time needed for the job. However, it is important to remember that the Clause 16.1 only allows early warning on matters, which could increase the project’s total cost. This includes the “discovery of unforeseen ground conditions, materials shortage, design problems”, etc. (Eggleston 2006:119). In ECC, the contractor is considered as an equal member of the employer’s team and he is responsible for setting down the activities he intends to undertake. Moreover, he is required to assess the effect of the change and provide the employer with a feasible alternative. Changes and other additional detail may trigger a compensation event but the resolution is always expected beneficial for both contractor and the employer (Bennett and Baird 2001:.24). Unlike JCT, the responsibility for unforeseen circumstances or matters beyond the control of both parties is shared and settled in the most beneficial way. Analysing the situation, if the ECC form of contract is in effect, the discovery of blue asbestos inside the ducts will be considered unforeseen and its removal is a shared responsibility between the contractor and the employer. Assuming that the contractor followed the early warning procedure, he is more likely to receive an extension and compensation for the additional work. On the other hand, the employer may ask the contractor to minimize the cost by proposing a less expensive alternative. 3. Conclusion The JCT and ECC forms of contract concerning unforeseen circumstances and delay varies greatly in their interpretation of responsibility. Responsibility in JCT seems to focus on whoever fails to complete the contract regardless of circumstances. As we discussed earlier, a work that is not included in the bill of items but indispensably necessary is the responsibility of the contractor. Therefore, removing dangerous material like blue asbestos inside the ducts is considered indispensable and part of the original work. The contractor is more likely to receive an extension but can never expect extra compensation for the additional work. On the other hand, ECC is expected to share the responsibility to all and settle the issue in favour of both contractor and employer. 4. 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